Monday, September 12, 2016

The Premier of Ontario launched a campaign advertising her concern about the impact of high electricity rates in proroguing the legislature, which allowed for a New Speech from the Throne setting government priorities. The speech announced a new policy for residential electricity consumers, re-implementing an old policy but providing an excuse to discuss the communication strategies impacting the electricity narrative in Ontario - among the political parties, and allegedly public servants.

A brief reverse timeline on tax policies and electricity in Ontario:

September 12, 2016 the Wynne government announces the provincial portion of the Harmonized Sales Tax (HST) will be rebated on residential and small business consumer bills as of January 1, 2017;

January 1, 2015 the Wynne government removes the Ontario Clean Energy Benefit (OCEB) that deducted 10% of residential electricity bills

January 1, 2011 the McGuinty government (same party) introduced the OCEB

July 1, 2010 the McGuinty government adds 8% to residential electricity bills when the Provincial and Federal sales taxes are harmonized as the HST

Let's not pretend that today's announcement is creative or terribly meaningful, but uncover the limitations that prevent the Premier from doing something meaningful to control costs - or allow her to let rates rise higher.

Rates are an increasingly major concern in Ontario. The cost of electricity is not just seen to be unreasonably high, it is widely seen as damaging to the provincial economy.

Slowing rate increases is critical.

Electricity is a necessity not a luxury.

A conservative strategist, Nick Kouvalis delivered a similar presentation to the Ontario Energy Association in the fall of 2015. That presentation also showed survey results indicating economy and jobs topped concerns, with energy prices not far behind.

Mr. Hearle noted some characteristics of public opinion that now drive Ontario Liberal Party public speaking on electricity. People like:

the elimination of coal

improved reliability

conservation

renewable energy (many remain positive on industrial wind - and most on solar)

Hearle, it seems to me, indicates a communication strategy that recognizes people don't want to blame cost hikes on things they like, and therefore Liberal policy is to challenge people to associate increased rates to the achievement of outcomes they desired - specifically coal's elimination in the generation of electricity, and alleged improvement to system reliability.1
An unfortunate corollary is that things people like causing rate hikes they don't is not a topic to be discussed under the communication policy.

Managing rate increases seems to be an important part of the communication strategy. The Long Term Energy Plan produced in 2013 projected residential rate increases. The plan was to push the greatest rate hikes to 2016, which marks the mid-term of the electoral mandate.

The rate hikes have been exceeding the 2013 forecast, and today's announcement marks the second time government policy has adjusted to attempt to keep inflation within projections. The government's plan was to continue collecting the debt retirement charge until they could promise to remove it as part of 2018's election campaign (it's long since been detached from reducing electricity sector debt), but comparing 2016's forecast to actual current charges for Toronto Hydro, it's clear it was removed to hide rate increases that exceeding the LTEP projections:

From a communication standpoint, it's understandable Ontario's Liberals have chosen policies to hide cost impacts, and it's understandable they choose to present price increases as being due to things Ontarians, in general, like. However, I see two problems with the narrative:

it's primarily bullshit,

public servants are delivering a political narrative unrelated to serving the public.

Coal-fired generation was essentially ended with 2013. The majority of the province's current solar generation facilities entered service after coal-fired generation ended, as did nearly half of all industrial wind capacity. I've demonstrated the costs of wind and solar generators contracted after the passage of the Green Energy Act are unrelated to the elimination of coal-fired power plants - they are related to a very short period of time where a panicky government responded to a recession with the introduction of an unwise experiment, and the subsequent cowardice preventing moving off the arbitrary renewable capacity targets set at that time.

Today members of the government are ignorantly citing a short blog post from the Financial Accountability Office of Ontario (FAO) - on a topic I've noted the FAO is not mandated to discuss; the Environmental Commissioner of Ontario was making up pricing information in discussing issues unrelated to her mandate this past week, and confidence in the electricity system operator must continue to dwindle as its people cheerfully continue pushing conservation and writing generation contracts as rate increases continue to exceed expectations and consumption remains stagnant at best.

It seems Ontario has replaced public professionals with public parrots.

Returning to the LTEP 2013 rate forecast, it appears to be least predictive of today's distribution and transmission charges. The government has been claiming billions of dollars of investment in wires, because their surveying shows reliability is important to people. But spending on wires was welcomed by Hydro One as it builds equity - with return of equity being the key component the regulator uses in setting Hydro Ones' rates. This is not to blame the regulator for rising transmission costs - during the short period of extreme waste surrounding the signing of the Green Energy Act, the OEB delivered a rate ruling staring down blessing nearly $8 billion in transmission spending, writing, "the Board will not approve the overall Green Energy Plan on a conceptual, or any other basis."
Returning to subsidizing electricity bills through the provincial treasury is particularly ridiculous as the Finance Minister raids Hydro One for $5 billion - which is about the total taken from the tax base to fund the Ontario Clean Energy Benefit (from 2011-2015), and therefore less than will be taken as the new rebate is also predicted to cost the provincial treasury roughly $1 billion a year. This appears, from a slide in Mr. Kouvalis fall presentation, an appeal to more basic political instincts - as the constituencies that elected Liberal members to the provincial parliament are in favour of selling off public utilities to purchase things for their area while rural, non-Liberal areas, are not:

The policies of giving money from taxpayers to electricity ratepayers in excess to the equity being removed from the electricity sector to fund urban transportation projects is likely to be as well received in Liberal strongholds as banning dihydrogen monoxide, and DNA labeling of groceries, might be.
All are equally justifiable.

It's understandable governments design communication strategies to appeal to the public's misunderstandings and immature perceptions of complex issues - and that's why today it was decided to have taxpayers pay off portions of all electricity bills.

It is understandable - and irresponsible, and disappointing.

Endnote

1. I attempted to transcribe two short portions of this presentation

I learned this years ago working with governments on trying to reduce deficits: people look for easy ways out of difficult decisions.It is more difficult for people to say if we are going to live with lower government deficits I am going to have to accept a lower standard of healthcare, or I am going to have to accept larger classroom sizes in schools, than it is to say, "those people and their expense accounts and their wasteful spending, if they only ran a tighter ship we could afford everything that we want."
We are seeing this right now with attitudes about what is driving electricity rates. So if you ask people, "How important these things are as drivers of electricity rates, you'll see is things like:
inefficiencies in how electricity companies are run,
debt that was accumulated years ago.
Both are considered to be way more significant than investments in reliability, even though people will acknowledge the system is far more reliable than it was 10 or 15 years ago - than the subsidization of renewable energies (because people want more renewable energy. if there's a sense out there that renewable energy is unpopular it is mistaken. there's been some backlash against wind, but solar remains overwhelmingly popular and the only thing people think about renewable energy is that there should be more of it, and that it is unequivocally the future of where we are going).
Lastly, eliminating coal as a source of generating electricity, because if people believe electricity is the primary reason electricity rates are high, they really can't complain about the fact electricity rates are high because they don't want to be using the coal.
These are the kind of exit ramps people take and if we are going to have a serious discussion about rates, we are going to have to push back a little on these things and talk to people about moving off coal was not a cost free thing to do, and that moving to cleaner sources of electricity require investment and have costs that are built into them.
(from 10:19, ending around 12: 40)

You cannot possibly go broke underestimating what people know about the electricity system. People don't know anything about it. They don't know whose job what is; they don't know what these acronyms stand for. In Ontario most people still talk to me about Ontario Hydro...
so it's really difficult for people to say this part of the electricity system is helping keep rates down and this part is really expensive with regards to rates, especially since most people don't think that renewables are costly.